Volkswagen is exploring a landmark shift from car manufacturing to defense production at one of its German plants, holding talks with Israel’s Rafael Advanced Defence Systems to produce components for the Iron Dome system, The Financial Times reported.

The potential deal would see the facility move away from passenger car production toward defense manufacturing, marking a significant shift for one of Europe’s largest automakers. The plant, which employs around 2,300 workers, faces an uncertain future as production of key models is set to end in the coming years.

Under the proposed arrangement, the site would produce support components for the Iron Dome system, including heavy-duty transport vehicles, launch units and power generators. The interceptor missiles themselves would not be manufactured at the plant, with separate facilities expected to handle that part of production.

German authorities are reportedly supportive of the initiative, reflecting a broader push to strengthen Europe’s defense capabilities amid rising geopolitical tensions. The transition is expected to require limited new investment, with existing production lines adaptable for defense-related output. If approved, manufacturing could begin within 12 to 18 months, pending workforce agreement.

Volkswagen’s works council has signaled openness to participating in defense projects, citing the need for Europe to boost its strategic autonomy. Officials have pointed to the changing global environment and the importance of diversifying industrial capabilities.

The Osnabrück plant has already been exploring alternatives to traditional car production. Prototype military vehicles based on existing models were recently showcased at a defense industry event to gauge market interest.

The discussions come as the European automotive sector faces mounting pressure from economic uncertainty, geopolitical risks and structural shifts in demand. Volkswagen has also agreed to a broader restructuring plan that includes significant job reductions in Germany by the end of the decade, though company officials have ruled out forced layoffs and plant closures under current agreements.

While it remains unclear whether the defense initiative will move forward, the proposal underscores a growing trend of industrial realignment in Europe, where major manufacturers are increasingly looking to defense contracts as a way to secure long-term stability.